What? You didn’t know he was a king? What do you call someone that ruled since 1959 without reasonable elections until they chose to retire, then abdicates in favor of a younger family member (i.e., King Raúl)? Oh, and there’s a son-in-law in the mix to succeed him; we’ll call him Prince Alberto. Oh, and somehow he’s worth a fortune, just like a king.

I’m going to pull rank here. King Fidel took over a country. The way to measure a country is with GDP. So, if you’re not getting information from a macroeconomist about Cuba and Fidel … you pretty much shouldn’t bother.

The thing is, it appears to be a huge mission of many people in the developed world to present Fidel as something that he was not, and this mostly begins with ignoring the GDP data.

From a macroeconomic perspective, Fidel is one of the worst humanitarian disasters in human history.

Data is not hard to come by on this. For all its faults, there is no competition for assessing economic conditions at the individual level than real GDP per capita. More on that later.

In the U.S., we are somewhat unsure of how we feel about Obama because the economy has struggled to grow real GDP at 2.0 to 2.5% per year. Even Obama’s supporters will typically admit that the economy doesn’t feel that great because we need to take away 1.5% to 2.0% population growth from the U.S. figure. Yet, from 1959 to 1999 Cuba’s real GDP per capita grew at 0.3% per year. Even in rather weak times, the U.S. has pulled away from Cuba.

One of the tightest arguments we make in science is to compare matched pairs. Try to find the closest analog, and then compare their differences with the passage of time. This is how we know North Korea is so bad — because it used to be comparable to South Korea. The same goes for the old West and East Germany. For Cuba, the closest analog is Puerto Rico. Both were Spanish colonies for 400 years. Both were occupied and dominated by the U.S. for the next 60 years. And Puerto Rico has quadrupled its real per capita GDP since 1959. The data on all this is solid, accepted, and widely used.

Fair enough. But supporters extoll the availability of free and effective healthcare and education in Cuba.

Let’s be very clear about this. If you don’t start with real GDP per capita, it’s easier to find claims about healthcare and education to be more convincing. But, if you do start with weak real GDP performance, then it should be clear that any claim that healthcare and educaton have gotten better in Cuba must be accompanied by a statement that everything else is even worse than we thought. Have you ever heard a statement like that? I didn’t think so.

Oh, and it’s very easy to find articles detailing how Cuba’s healthcare and education systems in 1959 were … already pretty good by international standards. Go ahead, dig into that on your own. Cuba only looks good on these counts if you forget the “compared to what” aspect.

Montana has no sales tax. It doesn’t even require the car to be physically present to get the plates.

So, if you’re typical, you buy your $20K car in, say, California, and don’t think too much about the almost $2K you pay in sales tax.

But if you’re rich, you buy your $1,000K car in California, travel up to Montana, get the plates, and avoid the $100K in sales tax. I’d say that’s worth the trip.

*****************************

I don’t know where I first heard of this technique, but it was in my head when I got my first job and car.

I was living in New York. It was 1989, and sales tax was about 8%. I was in graduate school, and I had 2 older cars dying slow painful deaths on my hands.

When I got the offer for my first real job (at the University of Alabama – thanks James Cover), one of the first things I did was drive down the road to buy a new car. It cost $14K. I had 30 days to plate the car.

I called the DMV in Tuscaloosa, and worked a plan out with a lovely older woman who managed the office.

Then I flew down to Alabama to find a place to live. While there, I plated the car that was sitting in the parking lot at my apartment building back in the Buffalo suburbs.

My recollection is now 27 years old, but I think the sales tax on cars in Alabama was 2% at the time. So I saved almost two months worth of rent.

The only condition was that I had to take up residence in Alabama within some rather long period like 90 days, which was no problem at all. I still tell people that New York was merely a good place to be from.

P.S. Amusing personal story. My late father-in-law was … hmmm … not popular with his family. He was not dialed in that I was getting a job, had a job, or was moving away … or that his daughter was going with me. He claimed that the first he found out about this was seeing the new car with Alabama plates in his driveway. Psyche!

Note that the scale has changed because Clinton is so far in front. In 2012, on the Sunday before the election, the prices were 53-47. This year, they’re 58-42.

These figures are from the Iowa Electronics Markets, which, for research purposes, allows betting on presidential elections. The numbers mean, using 2012 as an example, that you have to bet 58 on Clinton to win 100, but only 42 on Trump to win 100 (because he’s more of a long shot).

That could be interpreted two ways. If we think of it in terms of population, homeowners tend not to be single, so it’s likely that more than 63% of the population lives in a home owned by their family. Alternatively, if we were to look at just people in the labor force, we’d probably get somewhat less than 63% owning homes.

Then there’s the CPI, which is formed as a weighted average of expenditure shares. For urban consumers, the weight on housing is 41%. That’s on the high side for the country as a whole, but arguably better represents Brazile’s constituents. But, only 32% of expenditures are acutally on shelter (the other 9% is related to shelter). Digging deeper, only 7% is rent.

How far is Brazile off?

To be generous, her one off statement starts with 50% of the population, and claims they pay 50% of their income towards rent. That’s 25%. Perhaps she meant of their take-home pay, but given national effective tax rates of around 20%, that merely reduces the 25% down to 20%. So she’s off by a factor of 3.

No wonder she feels people need government help: she does not know what she’s talking about.

Thanks to Marginal Revolution, a post from Cherokee Gothic is getting a lot of attention. I forwarded it yesterday to a bright student who’s conflicted about macroeconomics. Here’s Kevin’s entire post:

“Michael Gapen, chief U.S. economist at Barclays Plc in New York, said Fischer’s comments “reflect an ongoing divergence of opinion” at the central bank. Fischer “doesn’t see much room for running the economy hot” while Yellen’s views “seem to provide a wide-open door to do that. You have a chair and a vice chair who see policy differently right now,” he said.”

After the events of the great recession, it’s just amazing to me that people think the economy is a steak, the Fed is a precision sous-vide machine, and all we have to decide is medium-rare or well-done.

For the millionth or so time, the models implying the Fed can do this, completely and utterly failed during the great recession. There is also evidence that a large part of the good outcomes credited to the Fed during the great moderation were actually due to exogenous forces (i.e. good luck).

Neither the Fed nor the President “runs” the economy. There is no stable, exploitable Phillips Curve / sous vide machine that lets us cook at a certain temperature.

This Fed worship is more religious than scientific. The past 10 years should be enough to convince anyone with an open mind that the Fed’s power over the economy is quite limited and tenuous.

But I guess it’s comforting to think that the little old lady behind the curtain can fix things for us.

In my principles class I have a bright guy (NC) in the front row. He doesn’t ask too many questions in class, but he asks some zingers after class … mostly because he’ catching on to the idea that what politicians say and do has little relation to what’s covered in the text. With permission, here’s his reply to my forward of Kevin’s post:

This was an interesting read, and definitely reflects where my frustrations with macroeconomics lie.

Out of all the classes I have taken in all the major fields of study here at SUU, no classes have been more eye-opening and more frustrating than macro and micro economics. I have no doubt that if anyone ever asked me what classes impacted my life the most it will be those two, primarily macro. The frustration stems from the fact that in my opinion economics is the only study where mankind is consistently hundreds of years behind its discoveries at all times. Medical discoveries, astronomical discoveries, chemical discoveries, engineering discoveries, all once more or less 'proved' are accepted with relative ease, and mankind benefits because of it. Sure, we burned a few people for saying the sun was at the center of the universe, but it didn't take thatlong for the heliocentric model to replace the geocentric model. Adam Smith shows in the late 1700's that trade benefits everyone, always, even if one gains more than the other, and its 2016 and half the nation is still calling for major restrictions on trade and fighting for jobs that do nothing but make the cost of living go up, like the steel industry in America. To me, that is unacceptable.

There are many economic issues that we are not 100% sure about, but there are plenty that for the most part economists are pretty damned sure about, such as the dangers of price ceilings/floors, restricted trade, planned economies, erosion of property rights, restriction of free trade, and discouragement of wealth. But despite this we are still having debates over whether or not to give a 206% [sic] minimum wage increase, whether or not to bring back jobs we suck at from other countries, whether we should force the redistribution of wealth, etc. To me this is equivalent to turning on your television and watching Trump try to convince the American people that the Sun orbits the Earth, and Hillary responds with 'No, the Earth goes around the Sun, which is the center of the universe.', better, but not by much.

Sometimes in your class I start to really consider a degree in economics. Then I remember that I'm still not comfortable with having an aneurysm at the age of 23.

Economists’ Normative Case for Government Intervention is a Very Poor Positive Theory of that Intervention

Boudreaux uses it as a title for the post, thus the capitals.

Let me unpack this as a way to figure it out for myself.

A normative case is an argument about how we think things ought to be. So the “normative case for government intervention” is a way of saying that government intervention is way to make things the way they ought to be.

A positive theory is one based on facts, about facts. So a “positive theory of that intervention” would be a theory of government intervention that incorporates and/or explains facts about the motivations and consequences of those actions.

Putting it all together, what I get out of this is that a position that the world would be a better place if only the government did something ignores the realities of what has happened when they have done some other things in the past.

The document … presents no concrete prescription to correct the trade imbalance it abhors. One key sentence: “Trump proposes eliminating America’s $500 billion trade deficit through a combination of increased exports and reduced imports.” This is a tautology, equivalent to saying one plans to weigh less in the future through a combination of losing weight and not gaining weight. [emphasis added]

The prize in economics comes out on Monday morning. Like many, I’ve failed miserably at predicting winners, so now I’ll just give you my wish list. I’d be happy with any one of these: Bhagwati, Nordhaus, Baumol, Demsetz, Harberger, or Paul Romer.

Genesis

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